The key players operating in the global herbal tea market include Tata Global Beverages Limited (India), Unilever PLC (UK), Organic India Pvt. Ltd. (India), The Hain Celestial Group, Inc. (US), Associated British Foods PLC (UK), Barry's Tea (Ireland), Apeejay Surrendra Group (India), Dilmah Ceylon Tea Company PLC (Sri Lanka), Harney & Sons (US), and Adagio Teas (US). The market comprises tier 1, tier 2, and local players as well. Tier 1 and tier 2 players have a global reach along with diverse product portfolios. Companies such as Tata Global Beverages Limited, Unilever PLC, The Hain Celestial Group, Inc., and Associated British Foods PLC are dominating the global market due to brand reputation, product differentiation, financial stability, and global presence.
The players are mainly focusing on product launches with new flavors and investing in research and development along with strategic growth initiatives such as acquisitions, partnerships, and expansions to strengthen their market position and capture a large customer base.
Michael Porter’s Five Forces model offers a framework to study the global herbal tea market. Strategic business managers, trying to gain an edge over competing firms in the global herbal tea market, can utilize this model to better comprehend the industry in which the company operates. The components of each of the forces and the degree of impact of each element in the context of the global herbal tea market have been broken down and analyzed.
Threat of New Entrants
There are several established players in the global herbal tea market. For instance, Tata Global Beverages Limited has grabbed a large share of the market and has a wide customer base based on its product quality. Therefore, it becomes difficult for new entrants to compete with established brands in the market. Additionally, new players need to invest heavily in creating a brand name through promotion and marketing. However, the barriers to enter the market are not very high and the initial investments required to start a herbal tea brand are moderate as well. The easy availability of raw materials and the wide consumption of herbal tea incentivize players in the food & beverage industry to extend their product portfolios by adding herbal tea.
Hence, the threat of new entrants in the global herbal tea market is expected to be moderate.
Bargaining Power of Suppliers
The suppliers in the global herbal tea market are farmers and independent suppliers of herbs and spices. The suppliers of premium-quality herbs and spices are concentrated in China, India, Japan, Indonesia, Thailand, and the Philippines. There are several herbal tea manufacturers whereas the suppliers of premium-quality ingredients are limited, which results in the latter’s dominance. However, several market players have entered into contractual partnerships with suppliers for a continuous, uninterrupted supply of herbs and spices for the production of herbal tea. This strategic move by producers gives them an upper hand while reducing the bargaining power of suppliers.
Hence, the bargaining power of suppliers in the global herbal tea market is expected to be moderate.
Bargaining Power of Buyers
The bargaining power is the pressure consumers exert on manufacturers to offer high-quality products at low prices. The buyer concentration is high in developed and emerging economies. However, limited product differentiation, low brand loyalty, and high price sensitivity result in minimal switching costs. These factors give the buyers significant leverage over the market players. Buyers have several substitute products from which to choose and consumers usually tend to experiment with new products in the market and often change their preferences.
Hence, the bargaining power of buyers in the global herbal tea market is expected to be high.
Threat of Substitutes
The close substitutes for herbal tea are other types of tea such as white tea, black tea, oolong tea, and green tea. The wide range of regular tea variants available in the market poses a threat to players in the global herbal tea market. Limited product awareness, low marketing initiatives in underdeveloped economies, and the popularity of regular tea for its pleasing flavor and aroma affect the threat of substitutes.
Hence, the threat of substitutes in the global herbal tea market is expected to be high.
Intensity of Rivalry
The global herbal tea market is highly competitive, marked with fierce rivalry among the players in terms of product quality, variety, and pricing. The growing demand for herbal tea among consumers is creating opportunities for the players to emphasize innovation and product quality to expand their customer base. Thus, manufacturers are focusing on reducing production costs to compete in the cut-throat market. They are also engaged in strategic expansions to strengthen their businesses and survive in the market.
Hence, the intensity of rivalry in the global herbal tea market is expected to be high.
